KARACHI: The US dollar appreciated more aggressively on Thursday as it gained Rs4.53 against the local currency, leaving little hope for exchange rate stability, particularly due to disinvestment in the domestic bonds.
The closing rates available from banks showed that the US dollar was closed at Rs166.13 while the day-long trading noted even higher rates.
Bankers had no idea how much US currency was withdrawn from the banks by the foreign investors on Thursday, who were making a big profit by investing in domestic bonds, particularly treasury bills.
Investment withdrawn on March 25 from treasury bills was $82.2 million, indicating the pace of outflow from the country.
Greenback appreciates by 2.8pc on Thursday, biggest surge in a session this year
Currency dealers in the banking markets said the dollar appreciated by 2.8 per cent on Thursday which was the biggest surge in a single session this year. For the last four months the exchange rate was almost stable in the range of Rs157 and Rs158.
The collective decline of rupee in the last three days against dollar was Rs7.1 or 4.48pc. The government is making efforts to borrow up to $4 billion from lending agencies and donors which would help the country’s foreign exchange reserves to remain intact.
The latest data shows that the foreign exchange reserves of both the State Bank (SBP) and the commercial banks have started declining. The foreign exchange reserves of the State Bank fell by $690 million during a week ending March 20.
The financial circle which deals in the currency trading said the export proceeds decline would further slash the foreign exchange reserves of the country.
It was noted that most of the currency experts hoped that the coronavirus outbreak would be over within 20 days and that the impact would be a calculated loss, not huge losses.
However, the reports appearing in the international media suggest that the coronavirus pandemic would change the entire economic structure. The global growth could be zero this year which means that Pakistan would also be part of this bleak picture of global economy.
Currency dealers outside the banks (open market) said they were sitting idle which means that the flow of dollars from open market to banks has stopped. This flow was about $300-$350m per month.
Bankers said that the import bill would be reduced this year due to massive fall of oil prices in the international market, but the expected fall in the export proceeds could erode the positive impact of low oil prices.
The Sate Bank has facilitated import of medical equipments and medicines along with other imports. It is believed that this import would increase pressure on foreign exchange reserves of the country.
The coronavirus pandemic, which has shaken the world economy, is mounting pressure on the already weak economic structure of Pakistan. The country has been able to bring down its current account deficit from $20bn to $13bn last year and was hopeful to cut it to somewhere around $5bn in the current fiscal -- FY20.
Besides, the latest developments associated with the virus-induced panic-like situation are pushing the foreign investors to go back to their origin as soon as possible.
Published in Dawn, March 27th, 2020